To understand the mechanism of how loyalty programs can work effectively, this paper reviews relevant factors which affect the effectiveness of this loyalty tool and then categorizes them into five groups: Program Design, Customer-related Factors, Market and Environmental Factors, Program Implementation, and Post-participation Customer Behavior. In addition, this present research has empirically investigated the relationships among design, implementation, and consequences of instrument, especially in terms of customer loyalty. The quality or effectiveness of design and implementation stages were assessed by customer’s perceived value and their satisfaction of loyalty programs, respectively. The findings indicated that the design effectiveness was positively related to the customer loyalty both toward the programs themselves and the stores. The effectiveness of the implementation stage also plays an important role as it fully mediated the relationship between program perceived value (design stage) and customer loyalty. The findings emphasize the importance of the consideration of all related factors together to ensure the effectiveness of loyalty schemes.